Officials in 12 states look to change fuel tax collections
During the past six years, nearly 30 states have raised or reformed their fuel tax rate. Despite the progress toward addressing transportation funding needs, legislators in more states continue to pursue additional revenue enhancements.
Below is recent activity at statehouses to adjust fuel tax rates.
Arizona
A leading House lawmaker has a bill to more than double the state’s fuel tax rate.
House Transportation Committee Chairman Noel Campbell, R-Prescott, says his bill would ensure that everyone is paying their fair share of ongoing maintenance of the state’s transportation system.
Campbell said the state is nearly $1 billion per year behind in transportation obligations. He adds that the state’s fuel tax is unchanged since 1991.
“The 18-cent gas tax was enough to fund our roads when our population was a little more than half our current size,” Campbell said in prepared remarks. “That, combined with the fact that electric vehicles and vehicles with alternative fuel sources are contributing very little for the roads they use, has created an untenable situation.”
As introduced, HB2536 would increase the 18-cent gas tax rate by 10 cents in 2019. Additional increases of
10 cents and 5 cents would occur in 2020 and 2021. At that time, the gas tax rate would hit 43 cents.
The tax on diesel would double from 18 to 36 cents in 2019. An additional 10-cent increase would take place in 2020 followed by a 5-cent increase in 2021. At that time, the diesel rate would total 51 cents.
Indiana
One state legislator wants to reverse last year’s repeal of the state’s motor carrier surcharge tax.
A 2018 law nixed collection of the surcharge tax in exchange for charging more tax at the fuel pump. Specifically, 19 cents more per gallon for diesel to total
48 cents in excise tax.
According to a fiscal note attached to the 2018 law, the change is expected to increase revenue to the State Highway Fund and decrease revenue to local units of government from the taxes paid by motor carriers.
Rep. Doug Miller, R-Elkhart, is the sponsor of a bill to reimpose the surcharge tax. The excise tax on diesel would be reduced by the same amount.
A separate bill from Rep. Ryan Lauer, R-Columbus, would halt future indexing of fuel tax rates. Specifically, HB1670 would keep the existing fuel tax rates at their current levels.
The percentage of tax revenue earmarked for counties would increase by nearly 3 percent and for cities and towns by 5 percent. Additionally, the inflation adjustment of supplemental fees to register electric and hybrid vehicles would be eliminated.
Lauer’s bill and Miller’s bill, HB1346, are in House committees.
Iowa
Perhaps the most unlikely fuel tax bill to pass from across the nation is an Iowa House bill to peel back the state’s tax rates.
Currently, the excise tax collected on gas is 30.5 cents, while the diesel rate is set at 32.5 cents.
HF168 would reduce the gas and diesel rates by about
15 cents over four years. At that time, the gas and diesel rate would settle at about 15 cents per gallon.
Maine
If one Maine state lawmaker gets her way, the gap in collection of diesel and gas taxes will be at least temporarily widened.
Maine now collects a 30-cent tax on gas purchases and a 31.2-cent tax on diesel.
Rep. Denise Tepler, D-Topsham, has introduced a bill to impose an additional 5 cents per gallon on diesel fuel to total 36.2 cents. The tax increase would sunset in November 2022. At that time, the Joint Committee on Transportation could submit legislation to retain, repeal or amend the diesel tax differential.
The new revenue would be earmarked for construction, reconstruction, maintenance and repair of roads and bridges.
LD466 awaits consideration in the Joint Committee on Transportation.
Minnesota
Newly seated Democratic Gov. Tim Walz is touting the need for a dime increase in the fuel excise tax to pay for road and bridge repair.
The state now charges a 25-cent excise rate on gas and diesel. The tax raised about $910 million one year ago.
Republican lawmakers say there is plenty of money already available for transportation. They cite a budget surplus.
One Senate bill would increase the state’s 25-cent excise rate on gas and diesel. Specifically, SF367 would increase the tax by 10 cents to 35 cents.
Each penny increase is estimated to raise $30 million annually.
The bill, sponsored by four Democratic legislators, is in the Senate Transportation Finance and Policy Committee.
New Mexico
Multiple bills in the House and Senate include a provision to raise the state’s fuel tax rate by a dime.
The legislation would increase the current 17-cent excise tax on gas to 27 cents. The tax is unchanged since 1993. The 21-cent excise tax on diesel would be raised by 5 cents to 26 cents.
An additional fee would also be added for hybrid and electric vehicles.
Ohio
Multiple legislators in the state House and Senate are supporting a plan to raise the state’s 28-cent fuel tax for out-of-staters.
The yet-to-be-introduced legislation would provide in-state fuel purchasers a tax break to relieve them of the additional tax burden.
Advocates say additional revenue is needed for transportation to fill the gap left by a now-defunct
$1.5 billion in turnpike bond funding.
A 15-member state committee is looking at solutions for Gov. Mike DeWine to bolster funding for major infrastructure work.
OOIDA believes increasing the fuel tax is the most equitable way for states to generate additional revenue.
Other states with legislation to increase fuel tax rates:
Arkansas – 6 cents
Hawaii – 5 cents
Mississippi – 12 cents for gas and 15 cents for diesel
New Hampshire– 6 cents
Wyoming – index for inflation LL